Raymond James upgraded AeroVironment (NASDAQ: AVAV) to Market Perform from Underperform, with shares rising more than 4% intra-day Monday following the move.
The upgrade came after the stock declined approximately 35% since early March, significantly underperforming the S&P 500, which fell about 5% over the same period. The firm also noted that the company’s next twelve months EBITDA multiple compressed from roughly 34x to about 28x.
Additionally, the analyst pointed to meaningful downward revisions to consensus estimates following the company’s fiscal third-quarter results, including sales estimate reductions of 4% to 11%.
Raymond James said that the combination of valuation compression, negative estimate revisions, and significant share price decline has balanced the risk-reward profile at current levels.
However, the firm cautioned that competitive pressures persist across several product lines, and that the transition of BlueHalo development programs into higher-volume, higher-margin production has taken longer than expected.
Looking ahead, the analyst noted improving order trends and potential increases in existing contract ceilings, driven by operational demand linked to geopolitical activity, including developments in Iran and longer-term replenishment of loitering munitions.
